Global capital warms up to Africa investments

AFRICA’s growth potential is gradually attracting global capital with United States’ pension funds also warming up to the region in response to upward investor appetite across the continent, a top Standard Bank executive has said.

“Africa’s growth story continues to be increasingly attractive to global capital. Africa is much more investor-ready, capable and transparent than it has ever been in the past and the result is that large United States pension funds are beginning to consider the region,” Mr Charl Bruyns, head of investor services for Standard Bank said.

“While the flows of global capital to Africa remain a small percentage of global flows, the continent has a growing ability to deploy these flows and to offer attractive returns at acceptable levels of risk.

“These funds, with long mandates and higher commitment levels, are ideal for Africa’s longer investment and return cycles,” he added.

Mr Bruyns’ sentiments follow recent engagements over the issue between Stanbic Bank Zimbabwe’s parent company, Standard Bank and the Bank of New York Mellon. These entities, in collaboration with the the NASP-USAID Investment Partnership for Mobilizing Institutional Investors to Develop Africa’s Infrastructure (“MiDA”), hosted a series of US-Africa pension fund roundtables in Johannesburg and involved representatives of major US, African and South African pension funds and asset management firms.

Standard Bank’s partnership with Bank of New York Mellon and others in hosting such platforms is seen as critical to the mandate of driving Africa’s growth. This is because the United States’ and Africa’s institutional communities as well as their banks have an incredible opportunity to influence future infrastructure investment, said Mr Bruyns.

Approximately US$10 trillion, public pension funds account for the largest pool of investment capital in the United States, according to Ms Donna Sims Wilson, chairperson of NASP. Apparently, estimates show that Africa needs, on average, US$90 billion in infrastructure investment annually over the next decade to truly achieve her economic potential. Despite Africa’s vast potential as an investment destination, parties to the engagement have noted that perceptions of risk persist resulting in less than one percent of the value of United States’ pension funds being invested in the continent.

“The purpose of the NASP African Institutional Investor Advisory Council is to educate, expose and then inspire US institutional investors to invest in Africa by delineating the actual versus perceived risks,” said Ms Sims Wilson.

The latest figures released by the African Development Bank (AfDB) suggest the continent’s infrastructure needs amount to between $130 to $170 billion a year with a current financing gap of $67 to $107 billion per annum. Given this financing gap, Africa offers vast opportunity for the investor base.